COMPAT upholds the order passed by CCI against Coal India Limited for abuse of dominance

COMPAT by its order dated December 09, 2016 has upheld the order of CCI whereby it held that Coal India Limited and Western Coalfields Limited were acting independently of the market forces and enjoy undisputed dominance in the relevant market of production and supply of non- coking coal to thermal producers in India and thereby, abusing their dominant position in contravention of the provisions of the Act. In the present case, information was filed by Sai Wardha Power Limited, wherein it was alleged that the appellants directly and/or indirectly, engaged in the production and supply of coal across the country which is the key raw material required for generation of power and enjoys monopoly over the production and supply of coal producing and supplying over 80% of coal in India. The appellants have abused their dominant position by delaying the execution of the Fuel Sale Agreements (FSA) which is required to procure the supply of coal from the appellants and forcing the informant to enter into one sided anticompetitive FSA under which the informant had no bargaining power or power to negotiate and was compelled to accept the dictated terms and conditions stipulated by the appellants provided in FSAs. It was also alleged by the informant that appellants excessively increased the price of coal from Rs. 1613 per MT to Rs. 2177 per MT (both exclusive of taxes), without there being any justification for the same and they resorted to discriminatory pricing between the informant and other buyers. It was also alleged that the provisions relating to quality of coal including sampling and testing of coal are also unfair and discriminatory. CCI after investigation concluded that the appellants are in dominant position in the relevant market and have abused their position in more than one count. CCI concluded that Coal India Limited (appellant)through its subsidiaries operates independently of market forces and enjoys undisputed dominance in the relevant market of production and supply of non-coking coal to the thermal power producers in India in contravention of the provisions of section 4(2)(a)(i) of the Act. CCI also directed appellant to cease and desist from indulging in the conduct which has been found to be in contravention of the provisions of the Act and to make necessary modifications in its agreements. Further CCI has already imposed a penalty of Rs. 1773.05 Crores upon the appellants in relation to the same relevant market .While the present matter involves issues in relation to cost plus mines, the clauses and conduct broadly relate to the supply of non-coking coal to thermal power producers. Further, some of the conduct and clauses found to be in contravention of the provisions of section 4 are similar to the clauses and conduct examined and held to be in violation of the Act in the earlier orders, for which the appellants have already been penalized. In view of the totality and peculiarity of the facts and circumstances of this case, CCI did not deem it appropriate to impose any penalty on the appellants in this case.

COMPAT while confirming the CCI order observed that the finding recorded by the DG that the relevant market is production and sale of coal for thermal power generation in India, which has been approved by the Commission cannot be flawed. It is not in dispute that Coal India Limited and its subsidiaries have monopoly in the matter of production and supply of coal to various consumers. Therefore, the conclusions recorded by the Commission that the appellants are in a dominant position in the relevant market are legally correct and does not call for interference. COMPAT also held that the findings and conclusion recorded by the Commission on various facets of abuse of dominant position are based on sound reasons and dismissed the appeal. (Source: COMPAT Order dated December 09, 2016. For full text see COMPAT website)

 Comdt. (Retd.) M. M. Sharma heads the Competition Law & Policy team in VA since 2009 and has over 30 years’ experience as an Advocate of Delhi High Court and holds a Post Graduate Diploma in Economics of Competition Law from Kings College, London. He has worked in the Competition Commission of India (CCI) as Additional Registrar during 2006-2008 and was responsible for drafting the Implementing Regulations under the Competition Act, 2002. He has experience of working as Head-Legal /In-house Counsel for a large Corporate Group in the Steel and Power sector before joining VA in 2009. He has represented clients as an independent arguing Counsel in landmark cases decided by CCI, the Competition Appellate Tribunal (COMPAT) , High Courts and the Supreme Court. As a prolific writer, he contributes articles and is regularly quoted on competition issues in National Newspapers and interviewed by TV Channels. He also teaches as a visiting faculty in various Universities and Institutions and is widely regarded as a subject expert in various Committees of Apex Business Chambers, such as FICCI, CII, ASSOCHAM and PHD CCI.
 Mr. Sharma has been mentioned as a “Notable Practitioner” in the “Competition/Antitrust” category of Chambers & Partners (Asia Pacific) Ranking of Leading Lawyers for Business in India for the year 2012 and 2013. VA’s competition law and policy team has also been awarded the Law Firm of the Year Award for “Competition/Antitrust Law” for 2013 by the Indian Business Law Journal.